Oil price drop 'hurdle' to B.C. LNG, says Harvard University study

The cost of a barrel of crude oil has plummeted from $107 to less than $50 - which could hinder B.C.'s developing liquefied natural gas industry.

Oil has lost value significantly since last summer, when the price per barrel touched $107

Cranes work in the water at a proposed LNG site near Kitimat, in northwestern B.C. on April 13, 2014. Domestic and foreign companies are looking to build two oil pipelines, multiple natural gas lines and a dozen liquefied natural gas plants in B.C. to gain access to the massive Asian market and reduce their reliance on U.S. buyers. (Julie Gordon/Reuters)

The plummeting cost of crude oil could hinder B.C.'s developing liquefied natural gas industry, according to a new study out of Harvard University.

The cost of a barrel of crude oil has sunk from $107 to less than $50 since last summer, largely due to oversupply from the U.S., which has flooded the market with shale oil.

Now a new study from the Belfer Center for Science and International Affairs at Harvard University said low oil prices will keep Canada from becoming a global LNG player until at least 2020.

"With the fall of oil prices worldwide, the delivery cost of the planned LNG plants for export will be inconsistent with the level of price existing in the main two markets for export, which are the European market and the Asian market," said Prof. Leonardo Maugeri in an interview produced by Harvard staff.

"Right now the cost, the planned costs, are in a very dangerous zone, and the collapse of oil prices will tend to make those costs too high to penetrate the system of price now existing in Europe and Asia."

On mobile? Click here to see Harvard University's interview with Prof. Leonardo Maugeri

The development of B.C.'s LNG industry has been a huge focus for Premier Christy Clark during her time in office. The province has yet to open an LNG facility, but a number of proposed projects are in the works.

Despite the drop in oil prices, David Keane — president of the B.C. Liquefied Natural Gas Alliance — said he's confident B.C. will emerge as a major player in the industry.

"Good projects will go forward," he told The Early Edition's Rick Cluff.

Keane said proponents of LNG will be looking at long term projections over the current price of oil.

"I think when you look at the projects, they're not going to be looking at what the spot price of oil is today, whether it's $115 a barrel or $50 a barrel.

"They're going to be taking a long-term view on this and they'll be looking internally at what their projections are for the future price that they're going to be able to sell the LNG at."

Transfer lines in an LNG terminal in Lusby, Maryland. BG Group has delayed its Prince Rupert, B.C., LNG project. (Gary Cameron/Reuters)

Keane said in addition to a huge supply of natural gas, B.C. has a number of advantages to bring in business over other jurisdictions, including a highly-educated workforce, strong education and health care systems and supportive provincial and federal governments.

"I firmly believe that British Columbia will be an important part of supply in the future."

To hear the full interview with B.C. Liquefied Natural Gas Alliance president David Keane, click the audio labelled: B .C. LNG could be hurt by falling oil prices.


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